Use common sense and 'Get Rich Slow'


It's not that Tama McAleese hates capitalism. She just thinks people should watch out for capitalists. Especially capitalists who write books.

Which is a funny set of sentiments for a Cleveland financial planner who's passing through town on what she laughingly calls "the book tour from hell," and racing from a morning radio gig in Baltimore to a nighttime cable television appearance in New York.

But Mrs. McAleese hasn't had a typical career path for a money maven. And her book bangs a different drum than the get-rich-quick-with-no-money-down books that periodically dot the best-seller lists.

"Get Rich Slow" is the title of Mrs. McAleese's book ($8.95, 213 pages, Career Press), and its ruling watchwords are caution and steadiness.

"Common sense is hard to market, but it makes sense," said the sixtyish Mrs. McAleese, a former teacher.

Her money ideas come from raising a family and putting kids through college on her teacher's salary and the earnings of her husband, an engineer. As she said, "We worked hard to make those dollars, and we understand how hard it is."

There, in a nutshell, is the essence of Mrs. McAleese and her book. "Get Rich Slow" is a sort of Jewish mother's guide to financial planning, written by someone who's both a financial planner (for the past eight years) and a mother of two grown children.

Rely on yourself, she preaches, not a salesman who calls himself (or herself) a professional. Don't be overly impressed by a salesman's good suit or fancy office. If a salesman is dying to have you buy a product, it probably benefits him more than it does you. And remember that in the end, you always pay the salesman's commission. (Speaking of commissions, Mrs. McAleese cheerfully admits that her royalty on the book is 61 cents a copy).

Rely on the basics, including a keen understanding of the wonders of compound interest, she says. And remember that outperforming inflation is more important than outperforming your friends' investments.

Start saving early -- set up a college fund when your baby is born and start saving for retirement in your 20s. A little bit saved early works harder than a lot saved late, she said.

Pay attention to details. Read your insurance policy, not the brochure that comes with it. Know the grace period that your credit card company offers before it starts charging interest.

If it looks too good to be true, it probably is. And the tortoise always beats the hare in the long run.

"We can't have crisis management," she said. "I'm conservative, basically. I just want to outpace inflation.

"No one works your money like you do," she said. "When the self-interest of the financial industry agrees with your strategy, chances are good that you had better rethink your position."

The prescriptions of people such as Charles Givens, whose "Wealth Without Risk" is a current best-seller, aren't for her.

"Dog and pony shows sell," she said, her lack of respect plain.

"If anyone had a secret formula, they wouldn't sell it to you," she added. "There is no secret formula.

"The average consumer has more in common with a Rockefeller or a Kennedy than a welfare [recipient], but they've been taught that someone else can [manage their money] better than they can. . . . The rules of the money game are simple. They're just in the fine print."

Mrs. McAleese's prescriptions are written in plain English in a relatively short book she said was designed to be user-friendly for consumers put off by more complicated texts.

The book deals strictly with the basics of financial planning. Chapters cover credit cards, insurance, college and retirement planning, house-hunting and estate planning. The book actually is less about getting rich, quickly or slowly, than about planning ahead to make sure your wage earner's paycheck can cover expensive necessities.

Some highlights:

* Buy term insurance rather than whole life insurance, and buy a lot of it. While the insurance industry touts the investment benefits of whole life, Mrs. McAleese says it's just too expensive.

"Most families simply can't afford enough cash-value insurance and must buy term," she writes. "I would rather see you insure your home for one-third of its value and buy enough death insurance in case you die. At least if your home burns down, you'll be there to help rebuild it. But you can't come back and correct the mistake of buying too little death insurance."

* Don't get your hopes up about your house's value. Mrs. McAleese thinks real estate is overrated as an investment vehicle. After taxes, interest and other charges, she said, the returns can be sneezed at. But when you "buy the money pit anyway," as she puts it, plan in advance what you can afford and don't let a salesperson talk you into something more expensive. Also, she recommends spending no more than 22 percent of monthly net income on a mortgage payment -- far below the 28 percent of gross income that is the standard means test for most mortgages.

* Remember that "charge it" was Custer's last command. Mrs. McAleese isn't a big fan of credit cards, and her advice about them is down to earth. Look for the lowest rate, don't forget that even the cheapest credit cards are still very expensive sources of money, and read the fine print. Some cards charge interest from the day a purchase is made, while others offer a grace

period of up to 30 days before the interest starts piling up. Always get the latter, she urges.

Such advice reads like a splash of cold water for post-1980s consumers bowed by excess consumption, real estate speculation and too much borrowing. "People are spending more money than they make, and they're being told it's OK," she said. "They're running a status game. People have got to start researching their own self-interest."

When people do research their own self-interest, Mrs. McAleese said, they'll come up with something like these top four goals for handling their money in these uncertain, recessionary times:

* Plan. "Sit down at the kitchen table tonight and make up the budget."

* Pay down consumer debt, especially high-interest credit cards. "I'll guarantee you [will save] 18 to 20 percent risk-free," she said.

* Defer large purchases. Even though you can pick up some houses now for less than they would have cost a year ago (in metropolitan Baltimore, average home prices have been flat), and you're more likely to get a discount on a new car, hold on to your cash, she said. The bargains will still be there later in the recession.

* Build up savings. "Cash is King. We've got another 10 months of the R-word," she said, referring to the recession.

Most of all, she said, use your head and devote the time it takes to make your money work hard. "Don't assume that money comes with brains. They're both necessary."

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